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Public cloud services are a strategic weapon for CIOs. More than a way to cease operating data centers, the public cloud offers CIOs the ability to focus on strategic projects aimed at boosting the bottom line.
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Why IBM/Red Hat just might become a cloud powerhouse

Amazon Web Services is the clear cloud winner, sitting on a run
rate of $27 billion and continuing to grow at 45 percent (or
better). Where AWS’s lead is a bit murkier, however, is in the
area of hybrid cloud, that mix of private and public cloud
resources that AWS reluctantly embraced, while others raced to
promote. Those others, especially Microsoft and IBM (with
significant help from Red Hat), have a real shot at owning a
bigger share of cloud growth, precisely because of their roots as
stodgy and dull enterprise vendors.

There’s no question that enterprises and other organizations are
moving to public cloud as quickly as they can. There’s also no
question that “as quickly as they can” turns out to be “not very
fast” in most instances.

Where CIOs see their IT spend falling—and
increasing

According to a recent Credit Suisse survey of 90
enterprise CIOs, spending on IT will decelerate in 2019 from 4.9
percent growth to 4.0 percent growth. This general decline,
however, obscures the fact that one area CIOs see growing—and
considerably—is cloud computing.

Against this backdrop, it’s interesting to see which vendors CIOs
expect to see their spending decline the most:

IBM: 46 percent

Oracle: 38 percent

Dell: 33 percent

Hewlett-Packard Enterprise: 32 percent

Cisco Systems: 32 percent

SAP: 21 percent

NetApp: 19 percent

HP: 19 percent

Microsoft: 17 percent

IBM’s Red Hat: 14 percent

And which vendors CIOs expect to see the biggest increases:

Microsoft: 74 percent

Amazon: 62 percent

VMware: 34 percent

Salesforce: 34 percent

Google: 26 percent

Dell: 24 percent

Cisco Systems: 22 percent

Oracle: 16 percent

SAP: 14 percent

IBM: 12 percent (Red Hat: 1 percent)

Asked another way, these same CIOs told Credit Suisse which
vendors will be their most strategic partners over the next three
years (respondents could select as many as three vendors).
Microsoft was tops, with nearly double the rating of any other
vendor (at 84 percent), with VMware (48 percent) and Salesforce
(48 percent) both tying for second. IBM mustered a mere 14
percent, and Red Hat fell into the “Other” category.

The hybrid cloud is a big bright spot
in an otherwise decelerating IT landscape. AWS takes the top spot
as being “most critical to your hybrid cloud strategy,” with
Microsoft (82 percent) taking second, and everyone else way below
these two: Google at 44 percent, VMware at 32 percent, Oracle at
13 percent, IBM at 13 percent, and Red Hat at 2 percent.

After AWS, it’s Microsoft and—just maybe—IBM/Red
Hat

A big part of the reason that CIOs expect to spend so much with
Microsoft is that the Redmond-based giant has long been a
strategic partner. Couple that with its solid public cloud and
hybrid cloud credentials, and you have a match made in heaven.
Microsoft isn’t going to topple AWS any time soon, given that the
public cloud leader has rolled out a strong hybrid cloud story,
particularly in its partnership with VMware. But Microsoft is
sitting in a strong position to capture an ever-growing share of
the cloud pie.

Other vendors are harder to get a read on, but for other
traditional enterprise vendors with a strong claim to cloud
ascendancy,IBM with its Red Hat
subsidiary makes an interesting choice.
While Oracle has largely punted on making big
moves, hardly spending any capital even to grow its data center
footprint, IBM invested $34 billion to gobble up Red Hat.
Separately, neither company was lighting the fire of CIO
imaginations, as measured by Credit Suisse survey data, but
together they just might. This is because arguably the biggest
strike against Red Hat was its lack of scale. IBM’s ownership,
done right, could solve this.

But one big blight on the IBM/Red Hat cloud option is that while
the world is decidedly hybrid today, that’s not where CIOs see
things moving. In fact, while 32 percent of those surveyed see
“no change” or a decline in public cloud spending in 2019,
everyone else sees significant increases. Those same CIOs saw no
change or declines in 2018. More tellingly, 51 percent expect to
shutter some or all of their private data centers and instead
outsource to public cloud companies.

Additionally, when asked what percentage of their IT budgets they
were spending on public cloud, 56 percent of CIOs said that they
were investing less than 10 percent of their total IT budget in
public cloud today, but that percentage of CIOs drops
precipitously to 32 percent in one year and to 18 percent within
three years. Within three years, 33 percent of CIOs surveyed will
spend at least 30 percent of their IT budgets on public cloud
services, up from just 9 percent today.

Yes, IBM has public cloud services. No, no one particularly cares
about them. But, again, put IBM’s sales and marketing heft
against things like Red Hat’s OpenShift and maybe, just maybe, we
could see another strong cloud competitor to give AWS and
Microsoft, in particular, a run for their cloud money.